Over the past 30 days sell side analysts that cover the Energy sector have been busy cutting their earnings estimates to reflect plummeting crude prices. They’ve snipped an average 3% from their Q4 2014 numbers for the 10 largest cap names, and slashed 19% off their 2015 whole-year estimates. Common wisdom has it that these reductions should shift over to the both Consumer sectors – Staples and Discretionary – driving estimated there higher. That isn’t happening. Over the same 30 day period, the analysts that follow the largest names in these groups haven’t moved their estimates for either Q4 or 2015 by even 1%.
"We have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth." We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough.
Here is the chart which we affectionately call the scariest chart for the US shale industry - namely the US rig count drop, which as Goldman notes, "is faster and larger than in any other bear market."
That's not why it is scary. The reason why is that the current rate of rig collapse is nowhere near enough. In other words, before the new pricing equilibrium can be established, virtually the entire US energy sector in its current appearance will have to be wiped out!
Adjusting Warren Buffett's favorite indicator for 'the giant con that America is still enjoying growing economic prosperity - predicated on debt being the bridge between rising GDP and a declining economy' suggests today’s true market valuation is more than twice the previous all time high in 2000.
It will be even more disruptive if some among them decide that the only reason for the failure of their collective delusion of grandeur is that they have not been deluded enough and that even more wild-eyed palliatives are therefore needed. Disruption on such a scale is not what the budding entrepreneur wants to contend with as he contemplates whether to risk both his capital and his reputation in launching or expanding a business, in ordering new equipment, or hiring new staff and so fostering a meaningful recovery. Disruption on such a scale is not something we should wish to inflict upon a system we have been both unable and unwilling to fully repair. Either way – damned if they do, damned if they don’t – disruption seems to be what we will get in the months ahead.
Every couple of years the same identical European drill repeats itself: 1) Greece makes loud noises as it approaches an election, 2) Europe says it couldn't care what the outcome is and that Greece should stay in the Euro but if it exits it won't be a disaster, 3) the ECB reminds everyone of the lie that it is not preparing for Plan B (it is) despite holding on to over €100 billion in "credibility-crushing" Greek bonds, 4) panicking Greek banks say the deposit outflow situation is completely under control (adding that "The Bank of Greece along with the European Central Bank are monitoring closely the developments and intervene whenever this is necessary," which is code word for far more familiar, five-letter word), and meanwhile 5) all non-Greek banks quietly start preparing for the worst case scenario. So far this time around, we had everything but step "5". We do now.
To most people it would be shocking that after $60 billion in litigation charges, i.e., the "cost of doing criminal business" for just the first 9 months of 2014 and a ridiculous $178 billion since Lehman the there would be those who are stunned that bonuses on Wall Street may take a hit as a result of all this rampant, and caught, criminality. Well, "those" exist. They are called bankers, the same group which in poll after poll heading into the end of 2014 predicted that this bonus season would be far better than what was paid out in 2013 (and most of which spent the money well in advance). Alas, that is not going to be the case.
"This is why Putin is Public Enemy Number 1. It’s because he’s blocking the US pivot to Asia, strengthening anti-Washington coalitions, sabotaging US foreign policy objectives in the Middle East, creating institutions that rival the IMF and World Bank, transacting massive energy deals with critical US allies, increasing membership in an integrated, single-market Eurasian Economic Union, and attacking the structural foundation upon which the entire US empire rests, the dollar." Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit from low oil prices; but what the Obama administration should be worried about is the second-order effects that will eventually show up...
A Permabull Throws In The Towel: "Stocks Are Massively Overvalued", Key Multiples Are Post-War RecordsSubmitted by Tyler Durden on 01/10/2015 22:15 -0500
"The median New York Stock Exchange (NYSE) stock is currently at a postwar record high P/E multiple, a record high relative to cash flow, and near a record high relative to book value! As of June 2014, the median U.S. stock was priced at a post-war high at slightly more than 20 times earnings! Similarly, at about 15 times, the median stock is also currently priced at a record high relative to cash flow. Finally, the median price to book value ratio has only been higher than it is currently in two years since 1951 (in 1969 and in 1998 which were both followed by significant declines)!" - Jim Paulsen
Be afraid, be very afraid. While French Interior Minister Bernard Cazeneuve said Friday "The nation is relieved tonight," after the two standoffs concluded, as CNN reports, the French government's work is not over. French law enforcement officers have been told to erase their social media presence and to carry their weapons at all times because terror sleeper cells have been activated over the last 24 hours in the country, according to a French police source. Investigations continue into which terrorist group was ultimately responsible and, not be outdone in the fearmongery, The US State Department has issued a Worldwide Caution warning travelers, of the "continuing threat of terrorist actions and violence against U.S. citizens and interests throughout the world." Thank goodness we have the governments to protect us.
... things like a 50%+ drop in oil prices happen. Which at some point will lead more people to wonder what the real numbers are. For emerging nations, those numbers will not be pretty for 2015. They’re going to feel like they’re being thrown right back into the Stone Age. And they’re not going to like that one bit, and look for ways to express their frustration. Volatility is not just on the rise in the world of finance. It also is in the real world that finance fails to reflect. At some point, the two will meet again, and Wall Street will mirror Main Street. It will make neither any happier. But it’ll be honest.
If it looks like a war, acts like a war and smells like a war, it may just be a war. The US has been waging economic, financial, trade, political and even kinetic war-by-proxy against Russia. The only question is why?
The short answer is in parts of Seattle, Charlotte, Phoenix, Atlanta, Tampa, Cincinnati, Raleigh, N.C., Houston, Denver, Columbus, Ohio, Sarasota-Bradenton, Fla., Raleigh, N.C., Chicago, and Winston-Salem, N.C. Among the 2,490 zip codes nationwide with at least one single family purchase by the top four institutional investors between January 2012 and October 2014, the top 50 zip codes with the highest percentage of purchases by the four largest institutional investors were in those metro areas. “The institutional investors kick-started the housing recovery by buying homes in bulk at the lowest point and holding them as rentals,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. Los Angeles County was among the top 10 for most purchases by institutional investors over the past three years, with 6,152. “As the market continues to climb, we expect these investors to start to sell off their inventory to capture the gains made in the past couple of years.”
- Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz
The entire theory of monetarism is coming undone in spectacular and empirical fashion, which leaves the entire status quo exposed. All that is left in defense is the same old refrain of “it wasn’t big enough.” That’s great for those in the ivory towers blinding themselves to the reality of a lost generation of Italians, Spaniards, French and now even Germans; a listing to which even the FOMC is worried may yet add Americans. Why anyone ever expected a different outcome is due solely to unrepentant ideology, since these central banks are following almost exactly the Japanese “model.”